Fund research firm Fitz Partners has found the ongoing charges figures (OCFs) for UK All Companies funds could rise by 0.25% if the Financial Conduct Authority (FCA) goes ahead with its 'all-in' fee proposals.
The firm said the FCA's Final Report on the Asset Management Market Study could drive OCFs of many funds in the sector above the 1% threshold, which is considered 'the ceiling' by many investors when it comes to acceptable fund charges.
Currently, 77% of active funds in the sector show OCFs of less than 1% on the clean share class, but with the addition of transaction fees to OCFs, Fitz Partners said a mere 28% of active funds in this sector would remain below a total fee ceiling of 1%.
If firms wanted to maintain the OCF they currently charge, it would mean an average cut of 30% in management fee revenues.
Transaction fees have fallen
However, Fitz found UK active fund transaction fees have already fallen by 20% since 2014 while portfolio turnover has remained the same.
Transaction fees decreased over the three year period from 0.25% to 0.20%, while the portfolio turnover on UK active funds moved from 59% to 52%.
Fitz Partners CEO Hugues Gillibert said: "We have seen a gradual disconnect between transaction fees and levels of portfolio turnover. A 20% drop in transaction fees over three years, while portfolio turnover has remained relatively unchanged, is a sign of further tightening of fund costs.
"Although these charges are not usually disclosed to investors, they would have an impact on overall fund performance and are monitored internally by asset managers."
He added: "When it comes to fund size, the impact on transaction fees is very real and as we see transaction fees gradually decreasing over the years, we also observe a further downward trend as funds' AUM increase."
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